One of the most common questions some asks when they are pawning an item at their local pawn shop is ''If I default on the loan payment will it affect my credit?'' The simple answer to that question is no it will not but you will however, forfeit the ownership right of whatever item you used as collateral for the pawn loan. Today''s featured article from moneycrashers.com takes an in depth look at credit scores and the hidden meaning behind the numbers. Read more below:
Understanding Credit Scores
Your credit score is a three-digit number that, without context, may mean very little to you. Here is a breakdown of how lenders, insurance agencies, and employers all view your credit score:
Excellent Credit: Credit Score Above 800
If your credit score is above 800, you have an exceptionally long credit history that is unmarred by things such as late payments, collections accounts, liens, judgments, or bankruptcies. Not only do you have multiple established lines of credit, but you have or have had experience with several different types of credit, including installment loans and revolving lines of credit. You generally have a stable work history, usually with one company.
Simply stated, you are an A+ borrower in the eyes of all lenders big and small, and will have no trouble securing a loan of your choosing. Be prepared to receive the very best interest rates, repayment terms, and lowest fees available. Insurance companies love people like you because they know that you’ll pay your premiums on time and do not pose any risk of insurance fraud. Plus, prospective employers love you too because you have shown yourself to be responsible and are less likely to steal from the company or commit fraud.
Very Good Credit: Credit Scores Between 750 and 800
If your credit score is between 750 and 800, you have a long and distinguished credit history that shows a responsible payment history and the ability to handle multiple types of credit responsibly. As a matter of fact, for the most part, you are regarded in the same standard as borrowers with excellent credit history, with the exception that you may have a higher debt-to-income ratio.
In the eyes of lenders, insurance companies, and employers, you’re just as good as anyone with excellent credit and, for the most part, will receive the same red carpet treatment. However, in some cases, you may end up paying a little more in interest. But ultimately, having very good credit will qualify you for some of the best deals in town.
Good Credit: Credit Scores Between 700 and 750
Having good credit means that you have built a solid credit history by working hard to keep your accounts in good standing – however, there may be a late payment or two somewhere in your past. Things happen sometimes, but they are nothing you can’t handle. You might have had a collections account reported, but you’ve paid it. And you know you have some extra credit card debt, but you’ve made strides to get it under control.
Generally, lenders will have no issues loaning money to someone like you. Your good credit score will land you competitive interest rates and low origination fees, though certainly not as good as you could have gotten with a few more points on your score. You’ll also have no trouble getting an insurance policy for just about any need, but you should expect your premiums to be somewhat higher than for those with excellent or even very good credit.